I've been around long to have weathered online shake-ups such as the first Google Penguin and Facebook Reach reduction to name 2 that impacted me.
Now Amazon, a long-time darling merchant for tens of thousands of affiliates, is changing its affiliate commission rate which will largely hurt most affiliates who do decent volume.
Ironically, I've long wished that more of my revenue was via Amazon. I typically earn $800 to $2,000 per month with Amazon which is okay but nothing like 5 and 6 figure monthly earners.
Amazon's impending March 1/17 affiliate commission structure change hammers home the importance of having diversified revenue streams. I'm fairly diversified, which probably restricts optimal earning many months, but it's a hedging strategy that more or less means I can weather big changes by a single entity.
Since I don't do huge Amazon volume and since I'm not in a niche hit hard by the commission change (i.e. toys, video games, computers), I won't notice this change at all. But I do feel for affiliates doing big volume in the hard-hit niches and product lines.
I suspect all this week many affiliates are researching alternatives to the Amazon affiliate program that will minimize lost revenue.
This post provides a list of Amazon affiliate options as well discusses some other options you have.
Old vs. New Commission Structure
Old Commission Structure
The old commission structure rewarded performance. The more you sold, the higher the commission rate.
The New Amazon Commission Structure (as of March 1, 2017):
So, if you were a successful affiliate earning 8%, it's possible your earnings will be cut by 20% to 50%. If you earn $50,000 per month, that's a $10,000 to $25,000 haircut.
Is Amazon Making a Mistake by Lowering Commissions?
Who am I to question Amazon's business strategy? The company is the online champion retailer. It's unstoppable right now.
In fact, I really don't know how much affiliates contributed to its success over the years. I suspect affiliates have helped grow the company, if not with direct sales, via exposure. With hundreds of thousands of sites recommending Amazon, that certainly must have helped built Amazon's brand.
Now that Amazon is a household name, they are less dependent on brand building and can focus on improving profit margins. The can improve margins by lower expenses such as affiliate commissions.
I doubt this move will hurt Amazon at all.
In fact, and here's the kicker... unfortunately, even at lower commission rates, Amazon is still the best option for many niches. However, I do urge you to test other merchants. You may be very surprised. For instance, I earn WAAAAAAAY higher earnings per click with non-Amazon merchants with one of my niche sites, so it goes to show you that Amazon is NOT the only game in town.
If you believe these changes are going to hurt your revenue big time, consider some alternative affiliate programs, which are as follows.
But, before going severing your ties altogether with Amazon, take a few moments and figure out exactly how much you'll lose...I provide a link to a free tool to help you figure out your potential losses below.
Amazon Affiliate Program Alternatives
Walmart is playing catch up with e-commerce. They're hungry. They have great prices. They sell tons of stuff. They do convert.
Is Walmart a viable alternative?
Yes and no. Walmart pays a flat 4% commission. If you promote product lines at Amazon paying less than 4%, you may want to give Walmart a shot.
Otherwise, at 4% Walmart isn't exactly a solid alternative.
In fact, Walmart may want to consider Amazon's lowering of commissions as an opportunity to attract more affiliates. Walmart could invest a ton of cash into its affiliate program, be more flexible in accepting affiliates (it's not easy to get approved) and of course bump commissions to 6% or higher and offer a 30 to 90 day cookie.
The way I see it is while commissions hurt Walmart's margins in the short term, what Walmart needs is for more people to open e-commerce accounts. Once people have accounts and join any special programs they offer, those customers are more likely to buy in the future.
Walmart should seriously consider this as a massive opportunity since many Amazon Affiliates may well be looking for alternatives throughout 2017.
AliExpress has some great deals and they sell a lot of different products, but there's 2 problems with switching from Amazon to AliExpress.
a. Conversion: I suspect Aliexpress does not convert as well as Amazon, at least for western countries. I don't know for sure, but I suspect this is the case.
b. Commission rate: AliExpress' commission rate tops out at 4% and in order to hit that you need to generate $1,000,000 in revenue for any given month. That means even if you sell a ton of stuff, you won't earn more than Amazon's 4%.
That said, you can promote AliExpress via Skimlinks. Since AliExpress is a preferred Skimlinks merchant, the average commission is around 9% via Skimlinks. It MAY be worth promoting AliExpress via Skimlinks.
At the end of the day, I doubt you'll do better with AliExpress than sticking with Amazon... but if you're taking a revenue bath, it's worth testing.
I've never promoted Ebay as an affiliate, so I'm totally unfamiliar with them. However, on Skimlinks, it sets out the average affiliate commission rate as 7.39% which is much better than 4%.
Ebay is a recognized and trusted online merchant so conversion is probably decent.
I did a little reading about the Ebay affiliate program and it seems that its affiliate program pays more on a cost per click basis, which is calculated on the quality of traffic you send their way. If this is still the case, your particular commission rate is unknown.
Actually, I've never seriously considered promoting Ebay, but the cost per click angle sounds attractive. I just may give them a shot.
If you've been hit hard by the new Amazon commission structure, you may definitely want to give Ebay a shot.
4. Individual Merchants?
I earn way more per click promoting individual merchants that focus on selling products serving a product vertical than with Amazon. Yes, I will continue promoting Amazon, but when you find one or two niche merchants that convert, they can outperform Amazon significantly. There are 3 reasons for this:
a. Higher conversion rate because of more variety and/or better products: Because the merchant focuses within a niche, they may offer better product selection and therefore convert better.
b. Higher commission rate: Many niche merchants pay a higher commission than Amazon.
c. Longer affiliate cookie: Amazon is unique with their absurdly short affiliate cookie (24 hours). Most online merchants offer at least a 30 day cookie. I know firsthand that longer cookies help increase revenue.
The problem, though, with individual merchants is in some niches you simply won't find merchants that pay a higher commission than Amazon, even after Amazon's lower commissions. For instance, Best Buy pays some ridiculously low percentage across different categories. It's not even worth linking to.
On the flip side, Samsung pays 6% to 8% via Skimlinks, which is quite high for a technology merchant. Compare that to Best Buy and Amazon's new technology commissions and you'll agree it's good. Of course the problem is you can only promote Samsung products leaving you scrambling to find decent options for non-Samsung products.
I think overall, it will be harder for physical product tech niches to deal with this. Most merchants pay very little.
BUT, other than technology hardware there are many viable merchants you can promote that pay reasonably well.
A quick way to research other merchants is checking out the following affiliate networks that have plenty of physical product merchants:
- Skimlinks (the merchant directory is huge so you can find opportunities there whether you use Skimlinks or not);
- Impact Radius
- Affiliate Window
I currently use Skimlinks, but I use them not as most people do, but instead as a backup merchant.
What I don't do is deploy Skimlinks sitewide which changes all affiliate links to Skimlinks. I tested this and earned quite a bit less.
What I do instead is when I want to promote a particular merchant with whom I don't have an affiliate account for whatever reason, I create a custom Skimlink for that merchant. Also, if a particular merchant is a preferred or elite merchant with Skimlinks, the commission can be very good. AliExpress is an example.
Another aspect of Skimlinks I like is some merchants don't have in-house affiliate programs and aren't listed with an affiliate network. They only offer affiliate relationships via Skimlinks and/or Viglinks. This is another reason I have an account.
Here's a screenshot of a few VIP merchants. As you can see the commissions can be good. I think there are 20,000 merchants with Skimlinks so the merchant search function alone is worth using.
What about Viglinks?
I have an account with them too, but my beef with them is you need to apply to many merchants inside the system. If I'm going through that in their system, I'll just apply directly to the merchant.
With Skimlinks, once you're approved, you're approved for all merchants. That makes it easy as a great backup affiliate option for a huge variety of merchants.
6. AdSense/Display Ads?
Am I really including display ads as an alternative to affiliate links promoting Amazon?
Yes, I am. While AdSense will never outperform a decently converting affiliate promotion web page, you never know now, depending on the niche you're in. If you're in the video game niche, your commission rate just went from 8% to 1% with Amazon. AdSense may be a better option.
Or you can hedge by keeping the affiliate links on the page and also display ads. I do this quite a bit too.
7. Shift Strategies?
a. Adjust product lines you promote
In some instances you might be able to shift product line promotion to something related. If you're really fortunate, you can incorporate some digital products, which usually pay high commission rate.
The point here is if you think you'll take a big hit (read the next section to learn how you can quickly calculate exactly how much you'll lose), you may want to consider how you can adjust the promotions on your website.
b. Change up your content
Another option is to publish more content that doesn't promote products and instead is monetized with display ads. I earn pretty well with display ads (more than affiliate commissions) so I wouldn't rule it out.
Even if you're clearly in a product-oriented niche, there is always pretty much unlimited content you can publish related to that niche which can be monetized with display ads.
Before Going Nuclear, Figure Out How Much You'll Actually Lose?
Before you start swapping affiliate links and cursing Amazon forever, take a step back and figure out exactly how much you stand to lose. It may not be as much as you thought. Let's hope this is the case.
How you can quickly calculate your lower Amazon affiliate revenue
My fellow Canadian and friend Jon Haver created a spreadsheet (it's free) that will automatically calculate how the new Amazon commission structure will impact you based on past earnings.
For example, Jon used his spreadsheet to learn that he would have earned 24% less in November and December 2016 under the new commission structure.
The spreadsheet is pretty cool. It's set up to automatically calculate your losses (or if lucky gains) by importing your Amazon Associate report data.
Visit Jon's blog post here which is where you can access his report.
It's Not Necessarily All Bad...
Significant changes like this isn't all bad... it ain't great, but it ain't all bad.
After Google Penguin, there was a huge SEO opportunity if you avoided spam links (an opportunity I didn't capitalize on, but wish I had looking back).
After the Facebook Reach Algo fiasco... well I can't think of any opportunity there. That was a gravy train I wish never ended. It was a super sweet gig while it lasted. Another opportunity I wish I had milked more.
Where's the Opportunity Here?
1. Less money means less competition. Obviously publishers will continue promoting Amazon, but on the whole there will be some drop outs... especially if the revenue fallout is bad.
Those that stay the course may see traffic grow which is always a good thing.
2. Other merchants may fill the void: I'd love to see other big merchants fill the void and invest in affiliates with higher commissions, longer cookies, more affiliate resources... all the stuff we love. I'm thinking Walmart, AliExpress, large niche site players (come on Best Buy... it's your time to step up here) and others.
I understand that it was hard previously for other retailers to match Amazon's commissions, but now is the time for other big retailers to embrace affiliates. I have no idea if this will happen, but we can always hope.
3. Cheaper sites to buy: Sites that take a hit revenue-wise will be cheaper to buy. This could afford a great opportunity for someone who has non-Amazon monetization know-how in particular niches.
You never know what will happen. Maybe this change will force you to make some changes that will do wonders for your online business. I know Google Penguin in 2012 forced me to make changes which in the end worked out very, very well.